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Hi all,
Hoping someone can help me learn here. This may be a dumb question, but thanks for any guidance...I don't have experience buying individual bonds.

Please correct any and all incorrect statements here, even before I pose the question.


So a bond is initially issued at a par value with an interest rate coupon. If one buys that bond when issued, they pay par, and get that interest rate until the bond comes due (or is called early). As the interest rate markets move, the bonds value can go up and down, and the corresponding interest rate would move inversely. Regardless, if the buyer just holds until it's due, they get their full investment back when it's called, and have collected the initial coupon rate along the way.
But if one were to buy the bond later on, after some of this movement, they buy it on the secondary market and pay current face value. Let's say par value was $100, and the price has gone up so one has to pay $110. If the initial coupon was at 5%, the new 'yield to maturity' for the person paying $110 would be 4.5%, correct? When the bond comes due, does that investor get back their initial investment (at the $110 price) or do they get paid back at par value, and thus also lose 10% of their initial capital investment?
I assume the latter (because why would a bond issuer be responsible for paying back the higher value), and if that's the case, the investor has to go into that investment knowing their yield is lower and also calculating in the capital loss at the end, correct? Or does the 'yield to maturity' figure include that capital loss in the calculation?

Thanks for any help!

Howard
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